People are constantly being tempted by external forces which can make it difficult for workers to manage their money and save efficiently for the future. Some people are able to think through the opportunity costs of their money like what they are giving up when the spend it on other things, but the majority of people’s financial decisions fall to cognitive biases. Cognitive biases are mistakes in the ways people think and act that preference their opinions instead of information.
People with financial issues often have clouded judgments because of these biases which makes it hard for them to manage their money. It is human nature to listen to these biases and choose the option with less friction costs like staying with the default option because it is more work to change it or basing a choice off the original impressions of each option. Also, social atmospheres have a serious effect on people’s decisions since it is human tendency to follow everyone else. Present bias is the toughest bias to overcome when it comes to finances because people focus on the present issues instead of thinking towards the future.
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